City’s hotel boom — too much and too soon?

Press, 12 May 1987, Page 17

City’s hotel boom — too much and too soon?

Competition for overseas visitors will become intense if five planned multi-million dollar hotels are built in Christchurch in the next four years. Those hotels alone would provide more than 1100 rooms catering for international visitors, in addition to the 600 rooms already underway and scheduled for completion by the end of 1988.

Sheraton is planning a 300room hotel on the Motorcorp site in Worcester Street

An Invercargill-based company, R6al Share Corporation, is planning two 200-room hotels on the corner of Russley Road and Memorial Avenue, near the airport ,

Maughold Enterprises has applied for permission to build a 200-room hotel at The Groynes, on the city’s edge. This hotel would be part of the Harvey Wallbanger chain. Prime West is planning a 224room hotel in Durham Street behind the Shangri-La Restaurant building.

i Rainbow Properties is still considering development of a Christchurch hotel containing 200 to 280 rooms, a project mentioned a year ago. A site has yet to be obtained.

But the central city F.T.C. department store site, previously mentioned as a place for a future hotel, will have a different form of commercial development Its owner, Chase Corporation, says a hotel is definitely not planned for the site.

Critics of the luxury hotelbuilding boom think the city could have an accommodation glut because developers have over-estimated the potential market

A yet-unreleased report prepared by some city hoteliers, says “the increased number of rooms available will far exceed growth of potential hotel guests in the near future.” Others are more optimistic. The New Zealand Tourism Council predicts more than a million, visitors by the year ending March, 1991, an annual increase of about 8 per cent.

Tourism is New Zealand’s growth industry. In 1986, 733,000 international visitors arrived here, 9.5 per cent up on 1985.

There was a significant rise in American and Japanese tourists.

Christchurch is seen as ideal for hotel development for several reasons. It lacks the international standard accommodation demanded by Japanese and Americans, especially at peak periods. That has been recognised by the Canterbury United Council, in a 1986 report by airlines and travel operators. One operator says many wealthy Americans, Japanese and Europeans avoid the South Island because up-market accommodation is not available.

More international flights through Christchurch would increase the demand for hotel beds.

Peter Inglis, of Real Share Corporation, expects Japan Airlines to fly a jumbo service to Christchurch by 1988, and United Airlines to exercise its recently granted landing rights in Christchurch.

But Japan Airlines dismissed the possibility. United Airlines says it is not planning flights here for at least two years. Some local hoteliers say that occupancy rates have fallen and, if another 1100 rooms appeared, the rates could drop below 40 per cent Their report says that developers are “over-reacting to the obvious enthusiasm of the Minister of Tourism” and placing too much emphasis on “total visitor arrivals.” They say that visitor arrivals are not the same as potential hotel guests. “I just don’t see the large increases, unfortunately,” says Alan Struthers, the operations manager for Horizon Holidays. Developers of three proposed hotels are planning to lease their buildings once they are com-

pleted. Some hoteliers say they are “cashing in” on the predicted tourist boom.

In their report, hoteliers point to a sharp decline in Australian tourists — down 20,000 in 1986. Since Australians comprise the bulk of visitors and stay longer than most, this drop could negate the growth of shorter stay visitors, such as the Japanese. Another trend is the increasing number of tourists who are backpackers or hire camper-vans. They do not contribute to the accommodation industry. The increased frequency of international flights reduces accommodation requirements if tourists spend less time in Christchurch waiting for out-bound flights. Christchurch could suffer if air services to the southern lakes district are improved or a direct flight from Auckland is introduced.

Hoteliers are also concerned that the short to medium outlook for the domestic economy is not bright, and aboutthepossibility that Operation Deep Freeze may shift to Australia, taking with it an associated demand for accommodation near the airport j In the hoteliers’ report both

the airport and Groynes proposals are opposed because they are not located where accommodation is demanded most — the inner city. Japanese tourists, in particular, insist on staying in a city centre.

Critics doubt there will be

enough transit passengers to warrant such hotels, especially with similar standard hotels already in the vicinity. “If there is going to be more like that, don’t bother,” says one tour operator. If necessary, say hoteliers, the three existing airport hotels — Travelodge, the Russley, and the Commodore Motor Inn —- all have room to expand. The Canterbury United Council opposes airport hotel development because it wants to protect the green belt and promote the “consolidation of major accommodation in the city centre,” according to its 1986 report Generally, those in the industry think it will be the lower, standard, older hotels which are not located centrally that could suffer from new hotel development

Hoteliers critical of the development have produced forecasts to highlight their concerns. They say that only 504 new rooms will be required by 1991 if occupancy remains at 65 per cent That would mean a surplus of 1200 rooms if all planned development goes ahead. Because demand is unpredictable and volatile, forecasts are open to question. The Canterbury United Council prefers not-to publish them. “It can be counter-productive,” says Malcolm Douglass, the United Council’s chief executive..

Increased competition does not worry developers. It is generally viewed as a good thing. While Sheraton does not see it as. a problem, it also expects few of the planned hotel projects to go ahead. ,

Michael Cockem, of the Southern Pacific Hotel Corporation, which will run the Parkroyal, says his company does not mind

competition because "we always do better than the competitor.”

He does not think the Sheraton project will be disruptive If it “happens at a logical pace.” Alan Winkle, manager of Noahs Hotel, says he does not see competition adversely affecting business. Tourism is affected by the world economy, exchange rates, social and political factors, popu-

lation trends, marketing strategies and the willingness of the domestic economy to bear its impact Forecasts are also complicated if, as assumed by developers, international class hotels generate their own demand. More rooms would make Christchurch more attractive as a conference centre, according to a developer. That is acknowledged in the hoteliers’ report The planned new hotels Intend to cater tor the same market With that in mind, "established hotels will also need to reposition themselves,” says Bruce Barker, regional liaison officer of the Tourist and Publicity Department

Bruce Dunstan, the Canterbury Promotion Council's chief executive, says the local accommodation industry would prefer the present situation to continue, with demand for accommodation exceeding supply. The Promotion Council, among others, prefers facilities to be in place when the demand comes.

Accommodation glut feared

Transit passenger number doubts

Repositioning foreseen